Tennessee tops Tax Foundation sales tax rankings

Tennessee ranks highest among all 50 states in a new study of state and local sales taxes released today by The Tax Foundation, a nonpartisan research organization.

Tennessee has the highest combined state and local sales tax rate with an average of 9.43 percent, according to the study.

Arizona is the next highest at 9.12 percent. Rounding out the five highest states are Louisiana (8.86 percent), Washington (8.83 percent) and Oklahoma (8.68 percent).

Tennessee shoppers will get a break from nation’s highest sales tax rate this weekend with the annual state sales tax holiday Friday through Sunday.

States with the lowest combined sales tax rates are Alaska (1.79 percent), Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent) and Wyoming (5.18).

California and Indiana have the highest state sales tax rates – 7.25 percent and 7 percent, respectively – but  rank 12th and 20th in combined state and local rates.

Only four states – Delaware, Montana, New Hampshire, and Oregon – levy no state or local sales tax.

“Retail sales taxes are one of the more transparent ways to collect tax revenue, as statewide sales tax rates are generally well-understood by taxpayers. The local sales taxes collected in thousands of jurisdictions in 37 states, however, often are not,” Tax Foundation economist Scott Drenkard said in a news release. “These rates can be substantial, so a state with a moderate statewide sales tax rate can end up with a very high combined state and local rate.”

The Tax Foundation has been analyzing tax policy since 1937 and probably is best known for its annual Tax Freedom Day calculation.

Tax Freedom Day is the date when taxpayers have earned enough to pay off their total tax bill. In Tennessee, freedom came on March 31 this year, according to the foundation.

Click here for The Tax Foundation report.